Jacksonville, FL - Interline Brands, Inc. reported sales and earnings for the fiscal quarter and year ended December 27, 2013(1).
Michael J. Grebe, Chairman and Chief Executive Officer, commented, "We closed out the year with strong momentum as we achieved our highest quarterly organic sales growth since the third quarter of 2006. I am particularly encouraged by the strength of the market fundamentals that underpinned our growth across all of our facilities maintenance end-markets. In addition, the strategic investments we have made over the past few years to add sales associates in underpenetrated geographies, enhance our technology platforms, and drive scale in our business led to above-market growth in our institutional and multi-family businesses. Given our success with these initiatives, we expect to continue these investments in 2014 to further accelerate our long-term growth rate. We continue to feel very good about our position in the markets we serve, and will remain focused on executing our strategic initiatives to grow national accounts, leverage our investments in talent and technology, and bring more products closer to our customers. Despite some limited weather impact to date in 2014, we enter the year with a great deal of excitement and confidence."
Fourth Quarter 2013 Results
Sales for the quarter ended December 27, 2013 were $390.1 million, a 20.5% increase compared to sales of $323.7 million for the quarter ended December 28, 2012. On an organic sales basis, sales increased 5.9% for the quarter. Sales to our institutional facilities customers, comprising 50% of sales, increased 40.8% for the quarter, and 6.3% on an organic sales basis. Sales to our multi-family housing facilities customers, comprising 28% of sales, increased 8.6% for the quarter. Sales to our residential facilities customers, comprising 22% of sales, increased 1.4% for the quarter.
Gross profit increased $18.0 million, or 15.3%, to $136.0 million for the fourth quarter of 2013, compared to $117.9 million for the fourth quarter of 2012. As a percentage of sales, gross profit decreased 150 basis points to 34.9% from 36.4% due to the inclusion of JanPak.
Selling, general and administrative ("SG&A") expenses for the fourth quarter of 2013 increased $14.7 million, or 15.4%, to $109.9 million from $95.3 million for the fourth quarter of 2012. As a percentage of sales, SG&A expenses were 28.2% compared to 29.4%, a decrease of 120 basis points. SG&A expenses for the quarter ended December 27, 2013 include approximately $2.7 million of expenses primarily related to our expansion initiatives during the quarter. On an organic basis and excluding distribution center consolidation and restructuring costs, acquisition costs, share-based compensation and litigation related costs, but including the cost of the expansion initiatives, SG&A as a percentage of sales decreased by 50 basis points year-over-year.
Fourth quarter 2013 Adjusted EBITDA of $32.4 million, or 8.3% of sales, increased 20.3% compared to $26.9 million, or 8.3% of sales, in the fourth quarter of 2012. Excluding the impact on Adjusted EBITDA of our expansion initiatives of $0.7 million, Adjusted EBITDA would have been $33.1 million.
Kenneth D. Sweder, President and Chief Operating Officer, commented, "We remain focused on enhancing our operating scale and efficiency, driving wider and deeper customer penetration, and ultimately, generating higher growth across our business. Our strong fourth quarter results were aided by key investments in our sales team, targeted geographic expansion and national account growth, more cross-selling, focused merchandising and marketing initiatives, and expanded technology and supply chain capabilities. For example, we added over 35 associates in the fourth quarter and over 100 associates throughout 2013 related to our expansion initiatives. A majority of these new associates are part of our sales organization, and we are encouraged by their initial contributions to our growth and success. We will continue to invest prudently in 2014 to exploit the many opportunities in front of us to enhance our market position and accelerate our growth. During the fourth quarter, we also celebrated the one year anniversary of the JanPak acquisition, which solidified our position as one of the largest national institutional facilities maintenance players in the industry. The integration efforts are going well as we begin to realize the benefits of merchandising synergies, a broader product offering and an expanded geographic footprint."
Including merger-related expenses as well as increased interest expense and depreciation and amortization expense associated with the previously disclosed acquisition of Interline and litigation related costs, net income for the fourth quarter of 2013 was $1.2 million compared to net loss of $3.7 million for the fourth quarter of the comparable 2012 period.
Fiscal 2013 Results
Sales for the fiscal year ended December 27, 2013 were $1,598.1 million, a 20.9% increase compared to sales of $1,322.3 million for the fiscal year ended December 28, 2012. On an average organic daily sales basis, sales increased 3.5% for the fiscal year ended December 27, 2013. Sales to our institutional facilities customers, comprising 50% of sales, increased 46.2% for the year, and 3.5% on an average organic daily sales basis. Sales to our multi-family housing facilities customers, comprising 30% of sales, increased 4.5% for the year, and 5% on an average daily sales basis. Sales to our residential facilities customers, comprising 20% of sales, increased by 1.7% for the year, and 2.1% on an average daily sales basis.
Gross profit increased $71.0 million, or 14.7%, to $553.0 million for the fiscal year ended December 27, 2013, compared to $482.0 million for the fiscal year ended December 28, 2012. As a percentage of sales, gross profit decreased 180 basis points to 34.6% from 36.4% in the comparable 2012 period primarily due to the inclusion of JanPak.
SG&A expenses for the fiscal year ended December 27, 2013 increased $86.3 million, or 23.3%, to $457.2 million from $370.9 million for the fiscal year ended December 28, 2012. As a percentage of sales, SG&A expenses were 28.6% compared to 28.1%, an increase of 50 basis points. SG&A expenses for the fiscal year ended December 27, 2013 include a pre-tax charge totaling $21.8 million for litigation related costs (as previously disclosed). On an organic basis and excluding distribution center consolidation and restructuring costs, acquisition costs, share-based compensation and litigation related costs, but including approximately $6.2 million of expense primarily related to our expansion initiatives, SG&A as a percentage of sales was consistent with the prior year.
Adjusted EBITDA of $133.1 million, or 8.3% of sales for the fiscal year ended December 27, 2013, increased 9.6% compared to $121.5 million, or 9.2% of sales, for the fiscal year ended December 28, 2012. Excluding the impact on Adjusted EBITDA of our expansion initiatives of $1.8 million, Adjusted EBITDA would have been $134.9 million.
Including merger-related expenses as well as increased interest expense and depreciation and amortization expense associated with the previously disclosed acquisition of Interline and litigation related costs, net loss for the fiscal year ended December 27, 2013 was $6.3 million compared to $15.6 million for the fiscal year ended December 28, 2012.
Operating Free Cash Flow and Leverage
Cash flow provided by operating activities for the fiscal year ended December 27, 2013 was $20.8 million compared to $29.3 million for the fiscal year ended December 28, 2012. Operating Free Cash Flow generated for the fiscal year ended December 27, 2013 was $91.2 million compared to $85.9 million during the fiscal year ended December 28, 2012.
Michael Grebe commented, "Our capital structure and liquidity position remain in excellent shape with cash and cash equivalents totaling $8 million and excess availability under the asset-based credit facility of $146 million. We also generated another quarter of strong operating cash flow bringing our total for 2013 to $91 million. The combination of our solid balance sheet and strong cash flows provides us the flexibility to continue to invest in and grow our business."
